For Requirement 2

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Double Corporation produces baseball bats for kids that it sells for $28 each. At capacity, the company can produce 36,000 bats a year. The costs of producing and selling 36,000 bats are as follows: E: (Click to view the costs.) Read the requirements Requirement 1. Suppose Double is currently producing and selling 34,000 bats. At this level of production and sales, its fixed costs are the same as given in the preceding table. Cobb Corporation wants to place a one-time special order for 2,000 bats at $21 each. Double will incur no variable selling costs for this special order. Should Double accept this one-time special order? Show your calculations. Determine the effect on operating income if the order is accepted. (Enter decreases in operating income with parentheses or a minus sign.) Revenues from special order $ 42.000 Variable manufacturing costs (30,000 12,000 Increase (decrease) in operating income if order is accepted Double should accept Cobb's special order because it increases operating income by $ 12.000 Requirement 2. Now suppose Double is currently producing and selling 36,000 bats. If Double accepts Cobb's offer it will have to sell 2,000 fewer bats to its regular customers. (a) On financial considerations alone, should Double accept this one-time special order? Show your calculations. (b) On financial considerations alone, at what price would Double be indifferent between accepting the special order and continuing to sell to its regular customers at $28 per bat? (c) What other factors should Double consider in deciding whether to accept the one-time special order? (a) On financial considerations alone, should Double accept this one-time special order? Show your calculations Determine the effect on operating income if the order is accepted. (Enter decreases in operating income with parentheses or a minus sign.) Increase (decrease) in operating income if order is accepted i Data Table Cost per Bat Total Costs Direct materials $ 10 $ 360,000 Variable direct manufacturing labor 3 108,000 Variable manufacturing overhead 2 72,000 Fixed manufacturing overhead 4 144,000 Variable selling expenses 1 36,000 3 3 Fixed selling expenses 108,000 $ 23 $ 828,000 Total costs Contribution margin foregone Fixed manufacturing costs Revenues from special order Total manufacturing costs Total manufacturing costs (less variable selling costs) Variable manufacturing costs Requirements 1. Suppose Double is currently producing and selling 34,000 bats. At this level of production and sales, its fixed costs are the same as given in the preceding table. Cobb Corporation wants to place a one-time special order for 2,000 bats at $21 each. Double will incur no variable selling costs for this special order. Should Double accept this one-time special order? Show your calculations. 2. Now suppose Double is currently producing and selling 36,000 bats. If Double accepts Cobb's offer it will have to sell 2,000 fewer bats to its regular customers. (a) On financial considerations alone, should Double accept this one-time special order? Show your calculations. (b) On financial considerations alone, at what price would Double be indifferent between accepting the special order and continuing to sell to its regular customers at $28 per bat? (c) What other factors should Double consider in deciding whether to accept the one-time special order